The regional gas distribution business, which serves almost 11 million
customers, could be worth as much as £11.2bn

National Grid, the operator of UK’s electricity and natural gas networks, has fired the starting gun on the potential sale of a majority stake in its domestic gas distribution business.

The process will start in the second half of the financial year and will most likely be completed in early 2017, the company said. It will return “substantially all” of the proceeds to shareholders.

National Grid’s regional gas distribution business, which serves almost 11 million customers, has an asset value of £8.5bn, but could be worth as much as £11.2bn ($16.9bn), according to analysts at RBC Europe. It delivered an operating profit of £428m in the six months to the end of September.

“Gas distribution in the UK is now a mature business with low growth of around 2pc a year,” said Steve Holliday, the company’s outgoing chief executive.

National Grid will focus instead on higher-growth prospects in its electricity network in England and Wales, which is growing at 5pc, and in its US arm, which is growing at 7pc. The company owns gas and electricity networks in Massachusetts, New York and Rhode Island, serving more than 7 million customers.

The sale of a majority stake in the UK gas network would “rebalance the portfolio” and “maintain our commitment to growing the dividend”, Mr Holliday said. National Grid would however retain a stake “north of 20pc”.

The division comprises four of the eight regional gas distribution networks in Great Britain - in the Midlands, north west, East Anglia and North London - and runs to around 82,000 miles of pipeline.

Announcement of the sale plan came as National Grid reported pre-tax profits up 21pc to £1.37bn, from £1.14bn a year earlier. Operating profit climbed 14pc to £1.8bn.

The company confirmed a 2pc rise in its interim dividend to 15p a share.

Steve Holliday is stepping down in 2016 Photo: Julian Simmonds

First-half earnings were boosted by one-off property sales in London and the South East and rising revenues in its joint ventures, which Mr Holliday said were unlikely to be repeated in the second half. National Grid also benefitted from an asset swap that saw it exchange its 20.4pc share of the Iroquois gas pipeline in northeastern US for a $225.4m stake in Dominion Midstream Partners, a gas company based in Virginia.

The company was “on track” to deliver full-year growth. Capital expenditure will be around £3.7bn, up from £3.47bn last year.

Extra capacity was found last week from London offices switching off their air conditioning as part of a new scheme that pays businesses to save energy when the grid is at peak demand. This scheme and others to add extra capacity will add 50p to consumers' annual energy bills - the same amount as last year, National Grid said.

“We like to have a reasonable buffer of supply over and above what we need. Last week was a good chance to use one of those new tools on the demand side,” Mr Holliday added.